UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: June 30, 2000
Commission file Number: 0-18259
AG-BAG INTERNATIONAL LIMITED
(Exact name of registrant as specified in its charter)
Delaware 93-1143627
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2320 SE Ag-Bag Lane, Warrenton OR 97146
(Address of principal executive offices) (Zip Code)
(503)861-1644
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.01 par value per share - 12,061,991 shares outstanding as of
July 14, 2000
1
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
AG-BAG INTERNATIONAL LIMITED
CONDENSED BALANCE SHEETS
ASSETS
June 30 December 31
(Unaudited)
2000 1999 1999
---------- ---------- ----------
Current assets:
Cash and cash equivalents $ 191,712 $ 656 $ 511,910
Accounts receivable 5,097,311 4,650,025 1,875,777
Inventories 9,566,416 7,893,077 7,168,740
Deferred income tax 320,608 294,000 121,000
Other current assets 338,899 476,517 305,289
---------- ---------- ---------
Total current assets 15,514,946 13,314,275 9,982,716
Deferred income tax - 41,000 -
Intangible assets, less
accumulated amortization 26,345 45,224 35,562
Property, plant and equipment
less accumulated depreciation 4,115,924 3,994,671 4,162,992
Other assets 525,624 451,416 393,969
--------- ---------- ---------
Total assets $20,182,839 $17,846,586 $14,575,239
========== ========== ==========
(Continued)
2
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AG-BAG INTERNATIONAL LIMITED
CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30 December 31
(Unaudited)
2000 1999 1999
---------- ---------- ----------
Current liabilities:
Notes payable to bank $3,397,242 $ 2,191,674 $ -
Current portion of long term
debt and capital lease
obligations 356,391 340,054 378,568
Current portion of notes
payable to shareholders' - 15,532 6,523
Accounts payable 2,508,078 2,072,778 1,133,994
Accrued expenses and other
current liabilities 1,287,843 1,369,999 1,295,745
Income tax payable 281,652 328,942 12,652
---------- ---------- ----------
Total current liabilities 7,831,206 6,318,979 2,827,482
Long term debt and capital
lease obligation, less
current portion 2,169,430 2,033,194 2,113,817
Deferred income taxes 21,000 - 7,000
--------- ---------- ---------
Total liabilities 10,021,636 8,352,173 4,948,299
--------- ---------- ---------
Commitments
Shareholders' equity:
Preferred stock, $4LV 8 1/2%
nonvoting 696,000 696,000 696,000
Common stock, $.01 par value 120,619 120,619 120,619
Additional paid-in capital 9,210,211 9,210,211 9,210,211
Retained earnings(deficit) 134,373 (532,417) (399,890)
--------- --------- ---------
Total shareholders' equity 10,161,203 9,494,413 9,626,940
--------- --------- ---------
Total liabilities and
shareholders' equity $20,182,839 $17,846,586 $14,575,239
========== ========== ==========
See Notes to Condensed Financial Information
3
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<TABLE>
<CAPTION>
AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
Preferred Stock Common Stock Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
------ ------ ------ ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 174,000 $696,000 12,061,991 $120,619 $9,210,211 $ ( 399,890) $ 9,626,940
Preferred stock dividends (14,790) (14,790)
Net loss ( 32,857) ( 32,857)
------- ------- ---------- ------- --------- --------- -----------
Balance March 31, 2000 174,000 696,000 12,061,991 120,619 9,210,211 ( 447,537) 9,579,293
Preferred stock dividends (14,790) (14,790)
Net income 596,700 596,700
------- ------- ---------- ------- --------- ---------- ------------
Balance June 30, 2000 174,000 $696,000 12,061,991 $120,619 $9,210,211 $ 134,373 $10,161,203
======= ======= ========== ======= ========= ========== ============
</TABLE>
See Notes to Condensed Financial Information
4
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF OPERATIONS
Three Months
Ended June 30
(Unaudited)
----------------------
2000 1999
---- ----
Net sales $ 9,642,887 $10,790,073
Cost of sales 7,351,168 7,998,675
--------- ---------
Gross profit from operations 2,291,719 2,791,398
Selling expenses 852,350 865,583
Administrative expenses 618,984 707,218
Research and development expenses 21,356 74,918
--------- ---------
Income from operations 799,029 1,143,679
Other income (expense):
Interest income 7,899 5,099
Interest expense (147,581) (108,349)
Miscellaneous 69,353 44,118
--------- ---------
Income before provision for
income taxes 728,700 1,084,547
Provision for income taxes 132,000 418,000
--------- ---------
Net income $ 596,700 $ 666,547
========= =========
Basic and diluted net income
per common share $ .05 $ .05
========= =========
Basic and diluted weighted average
number of common shares outstanding 12,061,991 12,061,991
========== ==========
See Notes to Condensed Financial Information
5
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AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF OPERATIONS
Six Months
Ended June 30
(Unaudited)
----------------------
2000 1999
---- ----
Net sales $16,334,664 $15,535,665
Cost of sales 12,620,028 11,699,694
--------- ---------
Gross profit from operations 3,714,636 3,835,971
Selling expenses 1,659,907 1,619,155
Administrative expenses 1,227,661 1,295,434
Research and development expenses 83,507 98,404
--------- ---------
Income from operations 743,561 822,978
Other income (expense):
Interest income 12,990 2,039
Interest expense (210,196) (158,942)
Miscellaneous 131,488 111,389
--------- ---------
Income before provision for
income taxes 677,843 777,464
Provision for income taxes 114,000 291,000
--------- ---------
Net income $ 563,843 $ 486,464
========= =========
Basic and diluted net income
per common share $ .05 $ .04
========= =========
Basic and diluted weighted average
number of common shares outstanding 12,061,991 12,061,991
========== ==========
See Notes to Condensed Financial Information
6
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AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended June 30
(Unaudited)
------------------------
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 563,843 $ 486,484
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 306,669 268,271
Inventory obsolescence reserves 92,500 51,000
(Gain)loss on disposition of fixed assets (100) 643
Deferred income taxes (155,000) -
Changes in assets and liabilities:
Accounts receivable (3,221,534) (2,316,113)
Inventories (2,490,176) (2,123,597)
Other current assets ( 64,218) ( 15,825)
Accounts payable 1,374,084 1,240,856
Accrued expenses and other current
liabilities (7,902) 49,989
Other assets (131,655) (51,991)
Income tax payable 269,000 289,306
----------- -----------
Net cash used in operating activities (3,464,489) (2,120,997)
----------- -----------
Cash flows from investing activities:
Capital expenditures (253,284) (208,352)
Proceeds from disposition of fixed assets 3,000 8,000
-------- --------
Net cash used in investing activities (250,284) (200,352)
--------- ---------
Cash flows from financing activities:
Net proceeds from line of credit 3,397,242 2,191,674
Principal payments on debt (197,664) (193,828)
Proceeds from issuance of debt 231,100 -
Payment of shareholders' notes (6,523) (7,875)
Payment of preferred dividends (29,580) (29,580)
--------- ---------
Net cash provided by financing activities 3,394,575 1,960,391
-------- --------
Net decrease in cash (320,198) (360,958)
Cash and cash equivalents at beginning
of period 511,910 361,614
------- -------
Cash and cash equivalents at end of period $ 191,712 $ 656
========= ==========
See Notes to Condensed Financial Information
7
<PAGE>
AG-BAG INTERNATIONAL LIMITED
Notes to Condensed Financial Information
(Unaudited)
Note 1 - Description of Business and Summary of Significant
Accounting Policies
--------------------------------------------------------------------------------
The Company's financial statements reflect all adjustments which, in the opinion
of management, are necessary for a fair statement of the results of operations
for the periods presented. Due to the seasonal nature of the business, the
operating results of the Company's quarterly financial information should not be
taken as indicative of the results of its operations for a full year. The
financial statements presented for the six-month period have been reviewed by an
independent accountant and should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1999 included in
the Company's annual report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 2000.
Inventories
-----------
Inventories consist of the following:
June 30 December 31
(Unaudited)
2000 1999 1999
---------- ---------- ----------
Finished goods $7,724,181 $6,125,746 $5,992,377
Work in process $1,413,411 $1,125,084 $1,131,439
Raw materials $ 428,824 $ 642,247 $ 44,924
---------- ---------- ----------
Total $9,566,416 $7,893,077 $7,168,740
========== ========== ==========
Provision for Income Taxes
--------------------------
The company's effective income tax rate of approximately 18.2% in the second
quarter of 2000 and 16.8% for the six months ended June 30, 2000 is less than
statutory tax rates due the recognition of $170,000 of research and development
credits in the second quarter of 2000.
Other Comprehensive Income
--------------------------
For 1999 and through June 30, 2000, the Company had no items of other
comprehensive income. Thus, net income is equal to total comprehensive income.
8
<PAGE>
Reclassifications
Certain reclassifications have been made to the financial statements for the
periods presented from amounts previously reported to conform with
classifications currently adopted. Such reclassifications had no effect on
previously reported shareholders' equity or results of operations.
9
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition
And Results Of Operations.
Results of Operations
---------------------
Reference is made to Item 7 of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Company's annual
report on Form 10-K for the year ended December 31, 1999, on file with the
Securities and Exchange Commission. The following discussion and analysis
pertains to the Company's results of operations for the three-month period ended
June 30, 2000, compared to the results of operations for the three-month period
ended June 30, 1999, and to the results of operations for the six-month period
ended June 30, 2000, compared to the results of operations for the six-month
period ended June 30, 1999, and to changes in the Company's financial condition
from December 31, 1999 to June 30, 2000.
The core business of the Company is historically seasonal due to the
harvest seasons in North America and Europe. The Company's machinery tends to be
purchased in anticipation of the next harvest season, so most of the sales of
machinery occur in the spring and summer. This requires the Company to carry
significant amounts of inventory to meet rapid delivery requirements of
customers. Bag sales tend to occur as the harvest season approaches in the
summer, and during the harvest season in the fall.
Approximately 95% of the Company's business is concentrated in the Northern
Hemisphere resulting in between 70-75% of the Company's revenue being generated
during the spring and summer (2nd and 3rd Quarters). The following table
outlines the percentage of revenue over the past three years by quarter:
Quarter 1997* 1998 1999
------- ---- ---- ----
1st 14% 17% 15%
2nd 40% 35% 33%
3rd 35% 35% 39%
4th 11% 13% 13%
* In addition to seasonal factors, revenues which normally would have occurred
in the first quarter of 1997 were not earned until the second quarter due to the
delay in the start up of the Company's new production facility in Blair,
Nebraska.
Sales for the quarter ended June 30, 2000 decreased 10.63% to
$9,642,887 compared to $10,790,073 for the quarter ended June 30, 1999. Sales
for the six-month period ended June 30, 2000 increased 5.14% to $16,334,664
compared to $15,535,665 for the six-month period ended June 30, 1999. Sales for
the quarter were down due to continued low U.S. milk prices, despite
supplemental grain feed costs remaining low which helped farmers' continue to
have operating funds available. Given the current economic situation in the
farming sector, the tightening credit by financial institutions and rising
interest
10
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rates, farmers are starting to be cautious on purchasing farm machinery
and equipment.
Sales for the six-month period were up as a result of increased sales
during the first quarter of 2000 when farmers' were optimistic that U.S. milk
prices would increase during the year and had funds available for purchases of
new machinery and equipment from their 1999 season.
Bag sale revenue for the second quarter of 2000 was down 5% and machine
sale revenue decreased 15% compared to the second quarter of 1999. Bag sale
revenue for the six-month period of 2000 was up 4% and machine sale revenue
increased 10% compared to the six-month period of 1999. Machine sales are
directly tied to farmers' income and therefore their ability to purchase new
equipment. The Company's bag and parts sales are driven by the total number of
bagging machines that are in the marketplace. However, there is not a perfect
correlation between the Company's bag sales and machine sales, as the Company's
and competitors' bags are interchangeable on all bagging machinery in the
industry.
Although the Company sells its product primarily through a worldwide
dealer network, certain sales are made directly to large volume customers when a
dealer is not present in the customer's geographic market. For each of the last
3 years, the Company estimates direct sales at between 30-35% of total sales and
the Company expects this historical sales mix to continue in the future. The
gross margins are typically within 200 to 300 basis points of those sales
realized through the Company's dealer network. However, various economic, volume
and market factors in the geographic area impact the ultimate margin.
Gross profit as a percentage of sales declined 2.11% for the quarter
ended June 30, 2000 and 1.95% for the six-month period ended June 30, 2000,
compared to the same periods in 1999. The decline resulted from lower margins on
bags in certain geographic, highly competitive, high volume areas. The decline
was also the result of lower margins on machinery during the quarter and
six-month periods, as a result of the mix of machines sold.
Selling expenses for the quarter ended June 30, 2000 decreased 1.53% to
$852,350 compared to $865,583 for the quarter ended June 30, 1999. Selling
expenses for the six-month period ended June 30, 2000 increased 2.52% to
$1,659,907 compared to $1,619,155 for the six-month period ended June 30, 1999.
The decrease for the quarter was the result of lower sales commissions from
lower sales volumes which were offset by increased sales personnel benefit
costs. The increase for the six-month period was the result of increased sales
personnel benefit costs, and commissions from higher year-to-date sales volumes.
Administrative expenses for the quarter ended June 30, 2000 decreased
12.48% to $618,984 compared to $707,218 for the period
11
<PAGE>
ended June 30, 1999. Administrative expenses for the six-month period ended June
30, 2000 decreased 5.23% to $1,227,661 compared to $1,295,434 for the six-month
period ended June 30, 1999. The decrease for the quarter and six-month period
was the result of lower professional fees relating to ongoing litigation which
were slightly offset by increased general and administrative operating overheads
and higher directors fees.
Research and development expenses for the quarter ended June 30, 2000
decreased 71.49% to $21,356 compared to $74,918 for the quarter ended June 30,
1999. Research and development expenses for the six-month period ended June 30,
2000 decreased 15.14% to $83,507 compared to $98,404 for the six-month period
ended June 30, 1999. The decrease for the quarter and six-month period was the
result of completed research on various projects undertaken regarding new silage
and nutritional studies of bagged feed and their effects on animal production.
Interest expense for the quarter ended June 30, 2000 increased 36.21%
to $147,581 compared to $108,349 for the period ended June 30, 1999. Interest
expense for the six-month period ended June 30, 2000 increased 32.25% to
$210,196 compared to $158,942 for the six-month period ended June 30, 1999. The
increase for the quarter and six- month period was the result of the Company
utilizing a larger portion of its credit facilities from increased production
for seasonal inventory demands, coupled with rising interest rates.
The Company has undergone a study with a consulting firm to determine
if costs associated with the Company's research and development activities were
eligible for research and development tax credits in its open tax years. The
Company has completed the study and filed the necessary forms through its 1998
open tax years during the second quarter of 2000 generating net tax credit
benefits of approximately $170,000. The company's effective income tax rate was
approximately 18.2% in the second quarter of 2000 and 16.8% for the six months
ended June 30, 2000. Excluding the benefit of the research and development tax
credit, the income tax rates would have been 41.4% and 41.9%, respectively. The
company's effective tax rates were 37.5% in the second quarter of 1999 and 37.5%
for the six months ended June 30, 1999.
Net income for the quarter ended June 30, 2000 decreased 10.48% to
$596,700 compared to $666,547 for the period ended June 30, 1999. Net income for
the six-month period ended June 30, 2000 increased 15.90% to $563,843 compared
to $486,464 for the six-month period ended June 30, 1999. The decrease for the
quarter was the result of lower sales from the continued low U.S. milk prices,
coupled with lower gross profit due to competition and product mix sold and
higher interest costs incurred, which were offset by lower selling,
administrative, research and income tax expense (as discussed above).
The increase in net income for the six-month period was the result of
increased sales which occurred during the first quarter of
12
<PAGE>
the year, coupled with lower administrative, research and income tax expense (as
discussed above); which was offset by lower gross profit due to competition and
product mix sold during the period, in addition to increased selling and
interest costs.
Year 2000
---------
The Company did not experience any computer system transitional problems as a
result of the Year 2000 "bug". Management does not expect any year 2000
transitional issues to have a material impact on the operations, cash flows or
financial condition of the Company.
Liquidity and Capital Resources
-------------------------------
The seasonal nature of the northern hemisphere farming industry, the
production time for equipment and the time required to prepare bags for use
requires the Company to package and carry high inventories to meet rapid
delivery requirements. In particular, the Company must maintain a significant
level of bags during the spring and summer to meet the sales demands during the
harvest season. The Company uses working capital and trade credit to increase
its inventory so that it has sufficient inventory available to meet its sales
demands through the spring and summer months.
The Company relies on its suppliers to provide trade credit to enable
the Company to build its inventory. The Company's suppliers have provided
sufficient trade credit to meet the demand to date and management believes this
will continue. No assurance can be given that suppliers will continue to provide
sufficient trade credit in the future.
Accounts receivable increased 9.62% at June 30, 2000 to $5,097,311
compared to $4,650,025 at June 30, 1999. The increase in accounts receivable was
the result of some extended term sales offered during the quarter to remain
competitive.
Inventory increased 21.20% at June 30, 2000 to $9,566,416, compared to
$7,893,077 at June 30, 1999. The increase in inventory resulted from increased
production during the quarter to maintain production efficiencies on the
Company's smaller bagging machines and to meet the seasonal demands and ordering
programs offered by the Company.
The current asset, deferred income taxes, increased 9.04% at June 30,
2000 to $320,608 compared to $294,000 at June 30, 1999. The increase was
primarily the result of research tax credit benefits.
Other current assets decreased 28.88% at June 30, 2000 to $338,899
compared to $476,517 at June 30, 1999. The decrease was primarily the result of
lower deposits and prepaid expenses.
13
<PAGE>
Intangible assets at June 30, 2000 decreased 41.75% to $26,345 compared to
$45,224 at June 30, 1999. The decrease was the result of normal amortization
expense.
The Company has a domestic operating line of credit with a limit of
$5,000,000, secured by accounts receivable, inventory, fixed asset blanket and
general intangibles. As of June 30, 2000, $3,397,242 had been drawn under the
credit line. On January 3, 2000, the Company obtained a $500,000 equipment
acquisition line for the purchase of new business equipment for the year 2000.
The equipment line is secured by a fixed asset lien on new equipment purchased.
As of June 30, 2000, $231,100 had been drawn under this equipment acquisition
line. Management believes that, funds generated from operations, its operating
line of credit and equipment line of credit, will be sufficient to meet the
Company's cash requirements through 2000.
Risk Factors
------------
The information set forth below relating to matters that are not
historical facts are "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934 and involve risks and uncertainties
which could cause actual results to differ materially from those set forth
below. Such risks and uncertainties include, but are not limited to, the
following:
o We are dependent on the Dairy Industry
More than 75% of our revenues come from the dairy industry.
o A downturn in the dairy industry could cause a reduction in the Company's
revenues.
The Company's sales are highly correlated with the price of milk
products and revenues of the dairy industry. When dairy farmers make
money, they buy the Company's products. When dairy farmers are not
making money, the Company's sales decline.
o The Company's revenues are seasonal and dependent on weather conditions.
The core business of the Company is dependent on weather conditions
during the harvest seasons in North America and Europe. Adverse weather
conditions affect farmers' crops and reduce demand for the Company's
products. Approximately 70%-75% of the Company's revenue is generated
in the second and third quarters.
o The Company may lose one or both of the two class action lawsuits pending
against it.
14
<PAGE>
Two class action lawsuits, both alleging antitrust violations, have
been filed against the Company and others. If the Company's efforts to
dismiss or favorably resolve the suits fails, the Company could incur
additional and significant litigation costs and experience a drain on
management and other resources. If the plaintiffs succeed in
establishing liability and obtain a judgment for damages, the award
could exceed the Company's entire net worth.
o The Company's intellectual property protection may not be adequate.
The Company has patents on its basic bagging machines and patents
pending on additional machines, bags and systems for silage bagging,
grain bagging and hay/straw bale bagging. The Company may not obtain
these patents and our patents may not withstand litigation challenges.
If the Company's patents do not withstand litigation challenges, the
Company's rights in its bag and machine technology could be diminished
or eliminated. Moreover, the issuance of patents covering any of the
Company's products may be insufficient to prevent competitors from
duplicating the Company's products. The patent laws of other countries
may differ from those of the United States as to the patentability of
the Company's products and processes, and the degree of protection
afforded by foreign patents may be different from that in the United
States.
o The Company relies on one principal supplier for its bags.
The Company purchases nearly all of its bags from one supplier under a
long-term requirements contract. Any disruption of the manufacturing
process could affect that company's ability to supply the Company's
needs, and could adversely affect the Company's sales.
o The Company's pricing is dependent on the price of resin.
The prices that the Company pays for bags, which account for
approximately half of our annual sales, are fixed annually in advance
and are tied directly to the price of resin. Resin prices have
historically been subject to significant price volatility. Increases in
the price of bags could adversely affect our profit margins if we are
unable to pass along the price increase, and would likely affect our
revenues if alternatives to our product become more attractive because
of the price increases.
o The Company's stock is traded on the OTC Bulletin Board, which may make the
stock more difficult to sell.
The Company no longer satisfies the criteria for continued quotation on
The Nasdaq SmallCap Market. The Company's stock
15
<PAGE>
is, instead, traded on the OTC Bulletin Board. As a result, the
Company's shareholders may find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of, the Company's
common stock, and the market price for the Company's common stock may
decline. Trading in the Company's common stock is subject to the
requirements of Rule 15g-9 promulgated under the Securities Exchange
Act of 1934. Under this rule, broker/dealers who recommend low-priced
securities to persons other than established customers and accredited
investors must satisfy special sales practice requirements, including a
requirement that they make an individualized written suitability
determination for the purchaser and receive the purchaser's written
consent prior to the transaction. The Securities Enforcement Remedies
and Penny Stock Reform Act of 1990 also requires additional disclosure
in connection with any trades involving a stock defined as a penny
stock (generally any equity security not traded on an exchange or
quoted on Nasdaq that has a market price of less than $5.00 per share,
subject to certain exceptions), including the delivery, prior to any
penny stock transaction, of a disclosure schedule explaining the penny
stock market and the risks associated with the penny stock market.
These requirements could severely limit the market liquidity of the
Company's common stock and the ability of the Company's shareholders to
dispose of their shares, particularly in a declining market.
16
<PAGE>
Moss Adams LLP
222 SW Columbia St., Suite 400
Portland, OR 97201-6642
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Board of Directors and Shareholders
Ag-Bag International Limited
We have reviewed the accompanying condensed balance sheet of Ag-Bag
International Limited as of June 30, 2000, the related condensed
statements of operations, shareholders' equity, and cash flows for the
six-month period ended June 30, 2000 and the condensed statement of
operations for the three-month period ended June 30, 2000. These
financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of Ag-Bag International limited
as of December 31, 1999, and the related statements of operations,
shareholders' equity, and cash flows for the year then ended not
presented herein; and in our report dated February 15, 2000, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed
balance sheet as of December 31, 1999, is fairly presented, in all
material respects, in relation to the balance sheet from which it has
been derived.
Portland, Oregon
July 21, 2000
17
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) An Annual Meeting of Stockholders was held on June 5, 2000.
(b) Michael B. Leahy, Rolf E. Soderstrom and Arthur P. Schuette were
elected by plurality as directors of the Company. Michael W. Foster,
Stan Vinson, Larry R. Inman, Lemuel E. Cunningham and Robert N.
Thurston continued as directors of the Company after the Annual Meeting
of Stockholders.
(c) The only matters voted upon at the Annual Meeting of Stockholders was
the election of Michael B. Leahy, Rolf E. Soderstrom and Arthur P.
Schuette as directors of the Company and for the appointment of Moss
Adams LLP as the Company's independent accountants for 2000. The
results of the election were as follows:
Votes Broker
Nominee Votes For Withheld Abstentions Nonvotes
------- --------- -------- ----------- --------
Michael B. 5,204,312 0 5,675,482 0
Leahy
Rolf E. 5,204,312 0 5,675,482 0
Soderstrom
Arthur P. 10,476,322 0 403,472 0
Schuette
Votes Broker
Votes For Against Abstentions Nonvotes
--------- ------- ----------- --------
Appointment 10,781,239 44,096 54,459 0
of Moss Adams,
LLP
(d) None.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27, Financial Data Schedule (Edgar Only)
(b) No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 2000.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AG-BAG INTERNATIONAL LIMITED,
a Delaware corporation
(Registrant)
Date: July 26, 2000 By: /s/ Michael R. Wallis
---------------------
Michael R. Wallis
Chief Financial Officer and
Vice President, Finance
20
